Taxed Enough Already

It seems that Tea Baggers are irate over the recent tax increases that Obama has forced down the throats of the American middle class. I’d be the first to agree that their anger was justified, if only the facts supported their claims. Unfortunately, they don’t. There haven’t been tax increases on the middle class under Obama. Quite the contrary, they’ve fallen. The following comes from the Center on Budget and Policy Priorities:

…Income taxes: A family of four in the exact middle of the income spectrum will pay only 4.6 percent of its income in federal income taxes this year, according to a new analysis by the Urban Institute-Brookings Institution Tax Policy Center. This is the second-lowest percentage in the past 50 years…

Federal income taxes on middle-income families have declined significantly in recent decades.

In 2000, the year before the 2001 tax cut that President Bush and Congress enacted, the median-income family of four paid 8.0 percent of its income in individual income taxes, according to Tax Policy Center estimates — a smaller share than in any year since 1967 (except for 1998 and 1999). The Bush tax cuts further reduced middle-income tax obligations.

This year, the Making Work Pay tax credit, which President Obama and Congress enacted as part of the 2009 American Recovery and Reinvestment Act, is providing a credit of $800 to married joint filers ($400 to single filers). A median-income family with two children thus will receive an $800 tax cut in the return it files this year.

With the new tax cut, the median family’s federal income taxes will equal just 4.6 percent of its income in 2009. That is lower than in any year since 1955 (the first year for which these data are available) except for 2008, when another stimulus-related tax cut was in effect.

The 4.6 percent effective tax rate — the percentage of its income that a family pays in taxes — is well below the 15 percent marginal tax rate that a family of four in the exact middle of the income spectrum faces. Typically, such a family reduces its effective tax rate by taking the standard deduction (or, in some cases, itemized deductions), personal exemptions, and tax credits such as the child tax credit. The Making Work Pay tax credit further reduces that family’s effective tax rate…

So, again, one has to wonder why these individuals weren’t protesting during the last administration, when the effective tax rate was higher? I suppose some of it could be tied to the economy, and the fear of many that their jobs may now be in jeopardy. A lot of people, prior to this most recent economic collapse, probably never gave a moment’s thought to their own savings, or just how much they’d be screwed should they suddenly find themselves without a job. But, now, they’re actually starting to think about it, and worrying about how much actually goes out in taxes. That, generally speaking, is a good thing. People should think about how much they’re contributing toward the running of our nation, and what they’re getting back in exchange. (A sober analysis, I would think, would lead rational people to question the fact that so many of their dollars are going to fight foreign wars, while so few are going toward education.) But, I don’t think that’s the case with most folks… at least not completely. I think most Tea Party participants, out there waving their “Taxed Enough Already” signs, probably think that Obama has raised their taxes. And I think it’s clear that there’s a group out there working actively to spread this lie – that the federal government is evolving toward socialism, and taking more and more of their hard-earned money. And that, I think, is not only loathsome but dangerous.

20 Comments

Well, to be fair — a rare word these days — the fears are about big tax increases coming up because of big deficits. And nobody denies that taxes will increase probably starting next year. The AMT needs to be fixed, Social Security contributions will need to be increased (probably coupled with lower benefits), Medicare has huge solvency problems, and it’s likely that we get something like a VAT (value-added tax). Plus many states are in deep financial trouble. I don’t like many of the angry messages of the Tea Party and some of the rabid followers, but they’re right about taxes going up. I just happen to think that it is worth paying more for health care reform, Social Security, and Medicare…

I suppose it could be true that they’re proactively protesting tax increases they feel are on the horizon, but I doubt it. I think that if you poll Tea Partiers, you’d find that most of them think that they’re paying more now than under Bush. And I agree that taxes may rise, but I don’t think it’ll be on the people at these Tea Party events. It’ll be on the people who fund the Tea Party events.

Taxes have gone up…and I’m lower/middle class. My income tax bill this year was higher than last year, and that tax bill was higher than the year before that. I don’t want to buy a house, or have a child, or purchase an electric/hybrid car, so I have nothing to deduct. My health insurance has also increased. We recieved no raise this year at work either. I wouldn’t mind paying more…things don’t stay the same price forever…but in turn, I want to see return on my investments. If life costs more, then it should also improve in quality, otherwise, we need to renegotiate with our suppliers, because the current contracts aren’t working. I just want to live, and go about my business. I have no increased extravagance in my lifestyle. The people at the top do…but I work just as hard. Share the wealth, fat cats.

Inflation is also nothing more than hidden tax. It’s the cost of business, passed on to the common man. Everything has increased in price. Just go grocery shopping and see.

Don’t take me wrong…I’m in NO WAY a tea bagger, or anything like that. I just hope that one day, the system can be fixed to ensure fairness and impartiality for all.
Local politics are worse. They are just criminals in training. They’re on a learning curve, and haven’t quite learned the fine art of the graft yet…

I’ve paid Federal Tax every year that I have worked. I file long form and have more than the standard amount of deductions. I don’t make much money, but I still owe Federal taxes each year. Can you help me understand how I can avoid paying the Federal tax that you and 47% of Americans manage to avoid? Is it extremely low income coupled with large family size? I find it hard to believe that 47% of Americans fit that category. What qualifies a person to avoid paying any tax?

Maybe you need to have some kids? Get married? Go to school? Be low middle class? It all adds up. Most people don’t pay much and many people don’t have to pay at all. Our federal taxes are incredibly low for all tax brackets.

I think that it’s pretty obvious to anyone who has ever filed.

Most people pay the majority of their taxes in state and local. I’m surprised you don’t know this? Maybe you actually live in England?

Taxes are a burden. There’s no doubt about it. But, in addition to the deductions mentioned above, there was a $400 credit as part of the 2009 American Recovery and Reinvestment Act. So, as rates didn’t rise, my guess is that perhaps something else changed in your life to account for your increased tax bill. We payed a lot more this year, for instance, because my wife earned more as a freelance graphic designer. We had to borrow against our home equity loan to pay them. But, as Pete suggests, I’m more likely to complain about my local taxes.

No, the numbers don’t add up as you say. I’m in a 15% Federal Tax bracket and the State tax rate is 4.35%. Even though I can exclude half my gross from the Federal tax, I still end up paying the Feds twice the amount I pay the State. My State and Property taxes combined are only slightly more than the Federal tax. The fact that I am married doesn’t save me a dime, but if I were in a higher income bracket, being married would cause me to pay higher rates than a single person. Are you sure that you are not confusing getting a $1000 refund check with paying no taxes at all and neglecting the fact that taxes are withheld from your paycheck throughout the year?

I am married, I have a boy on the way, and my wife went to school. I’ll live my life , thank you. Try not to hurt your eyes looking down so much. I work hard, and really don’t use any government services that I don’t pay for. I don’t mind paying taxes. It is the price tag for organized society. I enjoy the fact that a portion of those taxes go to programs that help those less fortunate in life than myself. I don’t want a refund, but what they take weekly from my check should cover my end. Set a fair rate, and take it weekly. That’s all I’m saying.

Also, I don’t live in England…and I’m not most people. I’m sorry you are, because 50% of the world is below average. Where do you rank…around the 37th percentile? Good day, Sir.

I don’t mind paying taxes and I think Mr. American dream wants to imply that I do. In fact, I think that what I pay in Federal (uhhh.. $0) is far too low for what I get in return . One day, I will likely make more than both Mr. American Dream and EOS combined (not joking), and my day of paying taxes will come and that’s completely fine with me. The fed knows this, and graciously gives me tax credits for my educational expenses, which helps to add up so that I pay no federal.

I did not pay any federal last year. I got every dime of what was withheld back plus some. My state and local taxes took up nearly %20 of the money I made last year. In return I get jack shit for my money.

I’m sorry that you have it so hard EOS. Maybe you need to talk to your accountant.

I don’t have an accountant. I work for a living and use my earnings for living expenses. The government takes about 40% of my earnings through one tax or another. Those who make more than I do can afford an accountant and find tax shelters so that they don’t have to pay much tax. Those who earn a lot less, don’t pay any tax, and that’s fine with me. If I work harder and get a raise, or if I get a higher paying job, I’ll be in the 20% Federal tax bracket – some incentive huh?

But look at yourself. You are a student who likely doesn’t work full time, yet you own a home and have a kid(s). Your tax credit for education is only a small portion of the tuition you have to pay. Maybe you take the maximum in loans. But unless you have a large inheritance, it’s hard to imagine that you are paying for your family’s living expenses. If state and local taxes take 20% of your earnings, it’s doubtful that you and your wife are earning much. Tax dollars are subsidizing your existence, yet you claim you don’t get jack for your money? I hope you are able to make more money than I when you get your degree, but in this economy you’re more likely to be unable to find a job in your field and overqualified for any job that’s available. And your loans will have to be repaid starting 6 months after you graduate. Once you start earning a living yourself you will quickly realize that taxes are not incredibly low at all.

What measure is being used to make the claim that 47% of Americans pay no Federal Taxes? Anyone who is employed and gets a paycheck pays federal taxes – even those making minimum wage. On my W-2, the line that said Federal Taxes withheld had $11,000+ in it. Are these not Federal ‘Taxes’? Are not the $5000+ in the State Income Tax withheld not State ‘Taxes’? With write offs (itemized deductions) and an educational credit for my kid, I ultimately got back a few bucks. Does this mean I ‘paid’ no Federal Taxes? Just curious on the genesis of how this figure that is getting thrown about is determined. If it is based on what is owed to the feds on a tax return, then the 47% figure is a bogus statistic (some would call a lie). If 47% is a real figure in that almost half of all americans pay nothing in to the system whatsoever, then we truly suck as half of all Americans are deadbeats.

Tommy, nope, those aren’t taxes, those are tax payments. And yes, there’s a difference. When you file your taxes you find out how much tax liability you have to pay on your taxable income. Taxable income is the number you arrive at after taking your deductions and exemptions away from your gross income. After the amount of tax is calculated you look for credits toward your tax liability. Some common credits include: child tax credit, child care credit, various education credits and earned income credit. If any liability is left after credits your paycheck withholding (the taxes you were talking about) goes toward paying that.

Just imagine for a moment, if when the President came into office there was a budget surplus of $128 Billion! Wouldn’t that be great, an actual surplus. Now imagine that after his first year in office the President turned that $128 billion surplus into a deficit of $158 billion. Let’s say that in his second year the deficit increased to $378 billion, then in his forth year $413 billion, and by the time the President left office he turned that $128 billion surplus into a deficit of $482 billion! Imagine that the President attributed a portion of this all time record setting deficit to a $170 billion stimulus package that was put through, the largest stimulus package in history, a $400 billion bailout of FannieMae and FreddieMac, a $182 billion bailout of AIG, and a $17.4 billion bailout of the auto industry. Now imagine that an additional $819.6 billion was spent during this time on the Iraq and Afghanistan wars, and it was not included in the deficit numbers previously mentioned, because funding for these wars was requested each year to congress as “emergency spending measures” beyond the budget that was already approved by congress. And finally, let’s imagine that members of congress blasted this president stating that because of his “reckless fiscal policies (he) will be remembered as the most fiscally irresponsible president in our nation’s history.” You would be certain that the opposition in congress would be fighting this president tooth and nail, voting nay on every proposal offered! You would be certain that FOX News would be all over this, blasting this President for his irresponsibility and for running this country in to the ground. You would bet that there would be Tea Party Protests breaking out all over the country with venomous anger about record setting deficits and gross over spending that certainly would lead our country to certain financial collapse! But for some strange reason, this never happened, no protests, not a word. That is not until Barack Obama became president. Everything I just described happened under George W. Bush, and no one said anything, nothing, not a single word…